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Q3 2016 U.S. Hotel MarketView

The U.S. lodging industry achieved a modest year-over-year RevPAR gain of 3.3% in Q3 2016 as a result of no change in occupancy and a 3.4% year-over-year increase in ADR.

Five of the largest 15 markets recorded year-over-year RevPAR decreases in Q3. The largest drop was in Houston, where RevPAR fell by 15.6%.

Demand grew by 1.6% year-over-year in Q3, but was down from 2.1% in Q2. This marks the 27th consecutive quarter of positive demand gains, a streak that we expect will continue well into 2018.

The year-over-year increase in the number of available rooms held steady at 1.6% between Q2 and Q3. Rooms under construction expanded to more than 183,000 units, with another 192,000 expected within 12 months.

Hotel investment accelerated in Q3 from the prior two quarters to $7.6 billion, re ecting a year-over-year gain of 2.4%. Still, year-to-date investment is 41.2% below the same period in 2015. The cap rate for all hotel transactions averaged 8.52% in Q3, essentially unchanged from the prior quarter but up 30 bps from the prior year.

CBRE Hotels’ Americas Research projects that the U.S. lodging industry will achieve an annual occupancy rate of 65.0% in 2017, just shy of the 65.3% occupancy level expected for 2016. ADR is forecast to grow by 3.3% in 2017, and annual supply by 1.8%—just shy of the long-run average. RevPAR is expected to grow by 2.9%